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CityTarget: Major Disappointment, but Is It An Epic Failure?

Stocks in this article: TGT AAPL TSLA LULU RH

NEW YORK ( TheStreet) -- I'm not much of a bricks-and-mortar shopper.

Unless there's something unique or otherwise stimulating about the physical retail experience, I stay away. By and large, it's a soulless proposition. There's little reason to do anything but stay home and shop online.

On a regular basis I visit the retail presences established by brands such as Apple (AAPL), Tesla Motors (TSLA), Lululemon (LULU) and Restoration Hardware (RH).

Why?

Because these stores have something to show me. I have never bought a darn thing from three of them, but I still visit regularly. And I'm hardly the only one. There's something powerful about that, at least when you're thinking about retail's hard times and how to transform the space.

We're morphing into a world where, increasingly, you do not need to go to physical stores for much. Amazon.com (AMZN) and other e-commerce successes have the things that do not spoil, but you must replenish covered. I bet it's not long before Amazon expands Amazon Fresh out of its Seattle-area pilot phase. Soon, they'll have the nation's groceries taken care of.

In the meantime, there's something to be said for keeping bricks-and-mortar retail alive.

It would be a shame to see it die. With a little vision and real risk taking, it can come alive again. Shopping can become something other than an online experience or, when done in person, a chore or urban sport.

Retail absolutely must step up its game.

This past weekend, I was excited to visit Target's (TST) new urban "concept" CityTarget.

The idea of a Target that appeals to city dwellers has always intrigued me. It has the potential to be something special. To leverage the unique sense of place retailers such as Whole Foods Market (WFM) use to layer their atmospheres in dense city centers.

With the qualifier that I have only visited the Westwood location (in West Los Angeles adjacent to the UCLA campus), it seems that Target has failed miserably, at least to breathe any new life whatsoever into bricks-and-mortar retail.

I always wondered why company executives don't say much about CityTarget on conference calls. And the analysts don't ask too many questions. While "urban" is not a major revenue generator today, it represents a massive opportunity that Target should hyper-focus on.

Here's pretty much all Target had to say about CityTarget on its most recent conference call:

... After 2 additional third quarter openings, we now have five CityTarget stores operating in four different metropolitan areas: Chicago, Los Angeles, San Francisco and Seattle. As expected, initial traffic to these stores have been strong, while gross margin mix has been slightly better than expected. The CityTarget team has done an outstanding job, accomplishing a virtually flawless launch of this new format. We plan to open three more CityTarget locations in 2013
.

Woo-hoo.

Initial research indicates that the typical guest in this new urban format is younger and more affluent than we see on average across the chain. And as expected, these stores are attracting many new guests
.

And, like, duh!

If city governments and urban planning departments rolled over, found some space, loosened ever-tightening parking restrictions and permitted Target to place suburban-sized stores in urban areas, that's exactly what Target would have done.

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